Eleventh hour intervention on regulation of letting agents

Today the lettings industry is due to be discussed in the House of Commons – with the Government set to overturn an amendment for the full regulation of letting agents.

Instead, an eleventh hour amendment of its own will require all letting agents to belong to an ombudsman scheme.

Today’s busy workload for MPs includes the Enterprise and Regulatory Reform Bill, where Baroness Hayter has proposed that letting agents be regarded, in law, as estate agents.

However, the Government plans to oppose the amendment and replace it with one of its own, which was announced to MPs only yesterday.

While this would not amend the Estate Agents Act to include letting agents, as Hayter has proposed, the new Government amendment clears the way to make letting agents belong to a recognised redress scheme.

This would require secondary legislation, the objective of which would be to offer redress to all landlords and tenants who use letting and managing agents.

The Hayter amendment only just scraped through in the House of Lords, and proposes redress plus the power to ban letting agents, and prevent banned estate agents from setting up a lettings business.

The government amendment – likely to be heard some time this afternoon – stops well short of this and does also not address the matter of client money protection. It also ignores much lobbying from the industry, including a template for regulation proposed by ARLA where it would have been one of the bodies running the scheme.

In a letter yesterday, housing minister Mark Prisk singles out only the SAFEagent scheme, which has not been supported by ARLA or RICS.

The letter says: “The Government considers that the majority of letting and managing agents provide a good service to their clients.” However, he acknowledges that a minority of agents engage in unacceptable practices.

He says that the Government’s approach is to encourage voluntary self-regulation, and Prisk specifically picks out the SAFEagent scheme for mention.

His letter continues: “The Government does not consider that full regulation of letting agents, as proposed within Baroness Hayter’s amendment, provides the answer and is concerned that this could impose a significant regulatory burden which would ultimately be passed across to tenants and potentially reduce innovation and competition within the industry.”

* On Sunday, a BBC 5 live Investigates radio programme focused on the problem of rogue letting agents, revealing that very few are punished: only 12 prosecutions were carried out last year by trading standards teams in 20 of the biggest councils in England, Scotland and Wales.

Meanwhile, agents in Scotland are still charging tenants fees, despite an outright legal ban that came into force last November.

Researchers on the programme contacted 25 letting agents in Scotland and found that a quarter are still passing charges on to tenants.